Primary insurance policies (see separate article "Primary Liability") have different limits depending on the particular coverage, but are often set at $1 million. In many circumstances this is not enough. Umbrella and excess policies give you more coverage.
What’s the Difference
Umbrella insurance provides coverage limits beyond what are provided by your primary coverage, including your liability coverage, and also provides coverage for occurrences that are NOT covered by your primary coverage. Excess insurance provides higher limits but only covers whatever is covered by your primary coverage; umbrella provides both higher limits and broader coverage.
How Much do You Need
Though limits vary, for many types of insurance the typical limit of coverage is $1 million. Some examples of when this might not be enough:
- Cargo Insurance: If you haul high-value items, a load of them can easily be worth more than $1 million.
- Pollution Insurance: If you are a gas hauler, a fat, oil, and grease hauler, or a hazmat hauler and due to a collision or rollover suffer a ruptured tank, immediate cleanup and ongoing contamination issues can conceivably run into tens of millions of dollars.
- Auto and General Liability Insurance: These cover you for driving and general business operations. A few scenarios: You or an employee hit a school bus with children onboard, seriously injuring many of them; will $1 million cover you? You haul gasoline and, subsequent to a ruptured tank, an explosion and fire injure or kill numerous people who are nearby, either passengers in other vehicles or pedestrians; will $1 million cover you? In a collision with another trucker, you destroy his cargo, which happens to be worth more than $1 million.
Certainly for the above and possibly for other types of insurance, the usual limits offered by your primary insurer might well be inadequate. Whether an umbrella policy or an excess policy makes most sense (an umbrella policy will cost more due to the broader coverage) depends on your particular business, as does the amount of extra coverage needed. For most businesses an additional $5 million in coverage is recommended; if you are a gas hauler, a fat, oil, and grease hauler, a hazmat hauler, or in some other high-risk business, $10 million or even more is recommended.
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